Interim Final Rule on Mandatory Rx and Health Cost Reporting

On November 17, 2021, federal regulators announced an interim final rule with request for comments (IFC) detailing the CAA‘s Title II Transparency Section 204 prescription drug and health cost reporting requirements.  These were delayed back in August but with an admonishment that group health plans should prepare to provide the mandatory reporting by December 27, 2022 .  This will be required not only of ERISA plans but also from governmental and church plans and even grandfathered plans, but this will not apply to health reimbursement arrangements (HRAs and ICHRAs).

Annual Data Requirements

• Plan year dates
• Number of enrollees
• States in which the plan is offered
• Total spending on health care services by the plan, broken down by:
  • The type of costs, including hospital costs, primary care costs, specialty care costs, prescription drug costs, and other medical costs including wellness services
  • Total annual spending on health care services by the plan vs. enrollees
  • Spending on prescription drugs by the plan vs. enrollees
• Average monthly premiums paid by employers vs. enrollees
• The 50 brand drugs most frequently dispensed under the plan, with the total number of paid claims for each of those drugs
• The 50 most costly prescription drugs under the plan’s total annual spending, with the total amount spent for each of those drugs
• The 50 prescription drugs with the greatest increase in plan expenditures plan year over plan year, with change in amounts for each of those drugs
• Any impact on premiums by rebates, fees, and any other remuneration paid by drug manufacturers, including:
  • Amounts paid for each therapeutic class
  • Amounts paid for each of the 25 drugs that yielded the highest amount of rebates and other remuneration
• Any reduction in premiums and out-of-pocket costs associated with rebates, fees, or other remuneration

Additional Details from the IFC

• “After careful consideration of whether aggregate or plan-level information would be more appropriate to facilitate development of the section 204 public report as well as feedback received from stakeholders, the Departments have determined that plans and issuers (or other entities reporting on their behalf) may submit the majority of the information required under these interim final rules on an aggregate basis. The only plan-level information collected will be the following:
  1. Identifying information for plans and issuers and other reporting entities;
  2. The beginning and end dates of the plan year that ended on or before the last day of the reference year;
  3. The number of participants, beneficiaries, or enrollees, as applicable, covered on the last day of the reference year; and
  4. Each state in which a plan or coverage is offered.”
• “Data submitted by reporting entities that are issuers, TPAs, or other plan service providers must be aggregated at the state and market segment level.”
  • “For example, if an issuer is the reporting entity, the issuer must report the data separately for each state where it offered coverage, and within each state must aggregate the data separately for the individual market (excluding student policies), the student market, the fully-insured small group market, the fully-insured large group market (excluding FEHB plans), and the FEHB line of business, as applicable.”
  • “If the issuer also provides TPA services to self-funded group health plans in the same state, the issuer must additionally aggregate the data separately for all of the self-funded plans offered by small employers and all of the self-funded plans offered by large employers for which the issuer acts as a TPA and as the reporting entity in the state.”
  • “When a group health plan, regardless of funding type, involves health coverage obtained from two affiliated issuers, one, often a health maintenance organization, providing in-network coverage only and the second, usually a preferred provider or similar organization, providing out-of-network coverage only, then for purposes of aggregating data at the reporting entity level, the plan’s out-of-network experience may be treated as if it were all related to the contract provided by the in-network issuer.”
  • “For purposes of aggregating data at the state level, the experience of fully-insured coverage must be attributed to the state where the contract was issued, while the experience of self-funded group health plans must be attributed to the state where the plan sponsor has its principal place of business, with certain exceptions.”
  • “For employment-based association coverage subject to ERISA, group health plans may exist at the individual employer level (a non-plan MEWA) or at the association level, if the association qualifies as an employer under ERISA section 3(5) (a plan MEWA)…The experience of health coverage provided through a group trust or a MEWA must be attributed to the state where the individual employer (if the plan is at the individual employer level) or the association (if the association qualifies as an employer under ERISA section 3(5)), respectively, has its principal place of business or the state where the association is incorporated, if the association has no principal place of business.”
• “Within each state and market segment, the data of fully-insured plans may be aggregated according to the issuer of the coverage provided to these plans…that acts as a reporting entity for these plans. The data of self-funded plans may be aggregated according to the TPA that acts as a reporting entity for these plans.”
  • “For example, if a TPA is the reporting entity for the total annual spending on health care data for 20 self-funded plans in a state and market segment and aggregates the data of those plans, and a PBM is the reporting entity for the top 25 list for the same 20 self-funded plans, then the PBM must aggregate the data of only these 20 self-funded plans in the state and market segment to produce the top 25 list for these 20 self-funded plans. If the PBM also serves as the top 25 list reporting entity for 30 other self-funded plans that utilize a different TPA for the section 204 data submission, then the PBM must additionally aggregate the data of only these 30 other self-funded plans in the state and market segment and produce a separate top 25 list for these 30 self-funded plans. However, the PBM cannot aggregate the data for all 50 self-funded plans to produce and submit a single top 25 list for the state and market segment.”
  • “Conversely, a single data submission by a TPA may be associated with more than one corresponding data submission by several PBMs if the self-funded group health plans for which the TPA acts as a reporting entity do not all utilize the same PBM.”
• “For each drug in the top 50 and top 25 lists, as well as for each therapeutic class, prescription drug spending and utilization, including:
  1. Total annual spending by the plan or coverage;
  2. Total annual spending by participants, beneficiaries, and enrollees enrolled in the plan or coverage, as applicable;
  3. The number of participants, beneficiaries, and enrollees, as applicable, with a paid prescription drug claim;
  4. Total dosage units dispensed; and
  5. The number of paid claims.”
• “The top 50 drugs must be determined separately for each aggregation level.”
  • “For example, if an issuer acts as the reporting entity, has health insurance business or acts as a TPA in multiple states and market segments, and aggregates the data at the state and market segment level, then the issuer must prepare the three top 50 lists for each market segment within each state. Each of these lists must be based on the combined experience of all plans or policies included in the relevant aggregation.”
  • “The Departments expect that it will be rare for self-funded plans to report these lists on their own using their own claims experience to determine the top 50 drugs, but to the extent a self-funded plan does so, any TPA that administers benefits for the plan should not include that plan’s experience in the TPA’s aggregated report.”

Timing

“The Departments interpret these statutory provisions to require plans and issuers to submit calendar year 2020 information by December 27, 2021, calendar year 2021 information by June 1, 2022, calendar year 2022 information by June 1, 2023, and so forth.”  While reporting by the initial deadlines is encouraged, regulators are holding to their previously communicated delay, stating “the Departments will not initiate enforcement action against a plan or issuer that does not report the required information by the first statutory deadline for reporting on December 27, 2021 or the second statutory deadline for reporting on June 1, 2022, and that instead submits the section 204 data submissions for the 2020 and 2021 reference years by December 27, 2022.”

Reporting Entities, Contracts, and Liability

Given that most data is expected at an aggregate level by state, market size, and funding type, with very little information actually being plan specific, it will make most sense for insurers, TPAs, and/or PBMs to compile and submit the mandatory reporting.  However, they do specifically mention “plans and issuers [are] responsible for providing the required information to the Departments.  Therefore, the Departments do not require TPAs or PBMs to submit the information.”  For example, the TPA or PBM may not know the employer/employee contribution split on premiums, and if rebates are shared through to the employer, the TPA/PBM may not have information on how that further impacts the premiums.  As such, “plans may need to revise their services agreements with TPAs to address liability for and the accuracy of the information that the TPA or PBM reports and the ways in which the plan can review such reporting to confirm its accuracy.”

• “The Departments are allowing plans and issuers to satisfy their reporting obligations under these interim final rules by having third parties, such as issuers, TPAs, or PBMs, submit some or all of the required information on their behalf, provided a plan or issuer enters into a written agreement with the third party that is providing the information on its behalf in accordance with these interim final rules. The Departments expect that it will be rare for group health plans to report the required information on their own, but nothing in these interim final rules prohibits them from doing so.”
• If fully insured, “the plan may satisfy the section 204 data submission requirements if the plan requires the health insurance issuer offering the coverage to report the required information in compliance with these interim final rules, pursuant to a written agreement. Under this provision, if the issuer fails to report the required information, then the issuer, not the plan, violates the reporting requirements.”
• “For both fully-insured and self-funded group health plans, as well as health insurance issuers offering group or individual health coverage…the plan or issuer may also satisfy the section 204 data submission requirements with respect to the required information that the plan or issuer, as applicable, requires another party (such as another issuer, a PBM, a TPA, or other third party) to report in compliance with these interim final rules, pursuant to a written agreement. Under this provision, if the third-party reporting entity fails to report the required information, the plan or issuer violates the reporting requirements.”
• Regulators do “require reporting of the total annual spending on prescription drugs administered in a hospital, clinic, provider’s office, or other provider setting and covered under the hospital or medical benefit of a plan or coverage (which may be a subset of, and already reported with, the total spending on hospital or other medical costs), separately from the total annual spending on drugs covered under the pharmacy benefit of a plan or coverage…However, in recognition of stakeholders’ concerns regarding the compliance burdens associated with reporting information on drugs covered under the hospital or medical benefit, these interim final rules do not, at this time, require plans and issuers to report data elements other than total annual spending” for drugs covered under the hospital or medical benefit.

Ultimately, regulators “intend to build a data collection system that will allow multiple  reporting entities to submit different subsets of the required information with respect to the same plan or issuer.”

Open to Public Comment for 60 Days

Public comments are encouraged but must be received by January 24, 2022.

IMA will continue to monitor regulator guidance and offer meaningful, practical, timely information.

This material should not be considered as a substitute for legal, tax and/or actuarial advice. Contact the appropriate professional counsel for such matters. These materials are not exhaustive and are subject to possible changes in applicable laws, rules, and regulations and their interpretations.